How You Can Best Prioritise Your Finances

Sat, 08 Sep 2018 by Peter U.

Unless you're a rich heir or heiress, you probably need to keep an eye on your spending, and prioritise some things, financially. It feels like we need everything we buy and that everything we want to save for is important, so sorting out priorities can be a difficult task.

However, we all have to start somewhere, and even being aware for this need to prioritise is a good sign and a great place to start. If you want to escape the anxiety of trying to spread your budget thin pulling it in a hundred different directions, then here are some tips on how you can set some financial priorities, in order to make sure that you achieve all of your financial goals.

Make A List Of All Of Your Financial Goals

The very first step, when trying to prioritise your finances, is to make a list of all the financial goals you have in life. Be mindful and realistic - writing down "Become an oil mogul" or "Win 1 million pounds" is not going to help. But everything you need money for, or would like to achieve, such as retirement, tuition costs for your children, creating a family, buying a home, going on a fabulous holiday, paying off your mortgage, buying a car, owning an expensive luxury item etc. should be represented on that list.

Order Them By Size

Now, I want you to order these goals by size or amount. See how much you would need for each goal, roughly, and how many categories you've got. Things like retirement and purchasing a home are going to be your massive and most expensive financial goals, but also creating a family - kids are expensive! - and then buying a car, going on holidays, etc. Seeing how much each thing costs and how many goals you've got in each cost bracket is going to give you a good idea of how much you can actually achieve and how much you need to prioritise. Citizens Advice can even help you with budgeting.

Order Them By Importance

Then, of course, you need to get to the sorting of actual priorities. This is the hardest part, because it requires making choices between goals that are all important to you and your life. Do you want to retire comfortably, or ensure your family a comfortable life? Do you pay your debt, or save tuition costs for your children? Would you rather buy your dream car, or go on your dream holiday?

This is the time to realise that you most likely will not be able to achieve all of your dreams and that some of these things will need to be eliminated completely, or just put on the back-burner, "just in case" you win the lottery. Be realistic and practical about it: children can get tuition loans, but you can't rely on the government pension, so that money is better spent on a retirement fund. And speaking of retirement, Money Saving Expert can teach you about personal pensions.

Stop Spending Money That Won't Get You Anywhere

Okay, and now that you've established what your goals are, and what your priorities are, how do you work towards achieving these goals? You can take them one by one, or several at a time, if they're long-term goals. But the important part right now is to stop putting money towards things that won't be rewarding for you. Instant gratification is great - in the moment - but you'll regret that money later, when you think about how much that could have meant in 30 years, thanks to compound interest. Keep your eye on the prize and make sure your money is going towards the right things.

Re-examine Your Priorities Every 5 To 10 Years

That being said, time passes, people change, and life doesn't always turn out the way we planned it. 10 years ago, you may have put down a certain amount for raising kids, but over time, decided that you don't actually want kids. Or that you'd rather have a decent deposit for a home than a big wedding. Or that you've moved somewhere else, and that shifted the cost of everything entirely. A re-examination of your priorities is in order every 5 to 10 years, so you can make sure your money is still working in your best interest.

In conclusion, sorting out your financial priorities can be a daunting task, but not an impossible one. You just have to be mature and realistic about it, and keep your long-term well-being in mind. If you still need help, the Money Advice Service has some great tips of money management.

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